Public-Sector Borrowing Outpaces Private Credit in KSA

Bank lending in Saudi Arabia continued to expand into early 2026, but a clear shift has emerged: credit to the public sector is now growing faster than lending to private businesses and consumers. Total bank credit to both sectors reached about SAR 3.335 trillion by the end of February 2026, up 9.6% year-on-year from roughly SAR 3.042 trillion a year earlier.

On the public side, claims on the government, quasi-government bodies, and public enterprises climbed to around SAR 930.1 billion by mid-2026, an annual rise of about 7.8%. Credit to public-sector enterprises stood near SAR 256 billion in April 2026, up roughly 17.2% year-on-year. The momentum was stronger heading into the year, with public-sector advances of about SAR 909.9 billion in the fourth quarter of 2025, growing 14.4% annually.

Private-sector credit, by contrast, has cooled. Lending to private borrowers reached around SAR 3.2 trillion by May 2026, but annual growth eased to roughly 6.6–6.8%, down sharply from the 16–18% pace seen through much of 2025. Total lending grew about 2.2% during January–May 2026, less than half the pace of the same months a year earlier.

Why it matters

The contrast is significant. In the third quarter of 2025, public-sector credit surged around 35% year-on-year versus about 13% for the private sector, and that gap has persisted into 2026 as private lending moderates to mid-single digits.

Funding trends help explain the picture. Government and government-related deposits rose to about 32% of total bank deposits by late 2025, up from roughly 20% in 2020. That inflow supports credit growth, but a funding gap remains, pushing banks to lean more on external debt to bridge the difference between loan demand and deposit growth — a dynamic worth watching for businesses and households seeking financing this year.

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